In re Global Outreach, S.A., Case No. 09-15985 (DHS) (Bankr.N.J. 6/8/2009), Case No. 09-15985 (DHS).
| Decision Date | 08 June 2009 |
| Docket Number | Case No. 09-15985 (DHS). |
| Parties | In Re: GLOBAL OUTREACH, S.A., Debtor. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Kasen & Kasen, David A. Kasen, Esq., Cherry Hill, New Jersey, Counsel for Debtor Global Outreach, S.A.
Sills Cummis & Gross, Jack M. Zackin, Esq., Newark, New Jersey, Counsel for YA Global Investments, L.P.
Porzio, Bromberg & Newman, P.C., Terri Jane Freedman, Esq., Douglas A. Amedeo, Esq., Morristown, New Jersey, Counsel to the Official Committee of Unsecured Creditors of Global Outreach, S.A.
Phillips Nizer LLP, Peter W. Smith, Esq., Hackensack, New Jersey, Counsel to Global Outreach, LLC, Global Financial Group, LLC, The Kothari Family 2000 Trust, Anil C. Kothari and Hemangini Kothari.
Before the Court is a motion filed by Global Outreach, S.A. ("Global Outreach" or "Debtor") seeking to enforce the automatic stay arguing that the Costa Rican properties at issue are property of the estate and subject to the stay. Also before the Court are the following filed by YA Global Investments, L.P. ("YA"): (a) Motion for Relief from the Automatic Stay Under Section 362(d) of the Bankruptcy Code and for Mandatory or Permissive Abstention under Section 1334(c)(1)-(2) of title 28 and (b) Motion to Remand Pursuant to 28 U.S.C. § 1452(b).
The Court has jurisdiction over these motions pursuant to 28 U.S.C. § 1334 and the Standing Order of Reference from the United States District Court for the District of New Jersey dated July 23, 1984. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). Venue is proper under 28 U.S.C. §§ 1408 and 1409.
The Debtor filed its voluntary Chapter 11 Petition on March 12, 2009. On March 20, 2009, the Debtor commenced an adversary proceeding against YA and also filed a Motion to Enforce the Automatic Stay. Thereafter, YA filed its motion for stay relief. During the oral argument on the Debtor's Motion to Enforce the Stay, the Court allowed the parties to submit their positions on Section 108(b) of the Bankruptcy Code, after which the Court entered an Order providing the Debtor with a sixty-day extension of its deadline to utilize the repayment provision of the Trust Agreement. On April 3, 2009, the Official Committee of Unsecured Creditors ("Committee") was appointed. On April 13, 2009, the Debtor removed a state court action commenced by YA against Global Outreach, LLC, Global Financial Group, LLC, The Kothari Family 2000 Trust, Anil C. Kothari and Hemangini Kothari ("Guarantors") and the Debtor to the District Court, which immediately referred
the removed action to the Bankruptcy Court. On April 21, 2009, YA filed a motion for remand of the removed state court action. During oral argument on YA's motions, the Court invited the Committee to respond to the Debtor's Motion to Enforce the Stay as it had not been appointed at the time of the initial hearing.
The Court hereby incorporates by reference and reiterates the facts recited in its prior Opinion in this case regarding Section 108(b) of the Bankruptcy Code dated April 1, 2009. The Debtor is a Costa Rican corporation with its principal place of business in Morristown, New Jersey. Global Outreach, LLC holds 98 shares of the Debtor and Hemangini Kothari holds the remaining 2 shares. Global Outreach, LLC is organized under New Jersey state law and has its principal place of business in Morristown, New Jersey. It is wholly owned by Hemangini Kothari. Another related entity is Global Financial Group, LLC owned in its entirety by Hemangini Kothari and organized under the laws of the State of New Jersey. Anil Kothari, the husband of Hemangini Kothari, is President of the Debtor, Manager of Global Outreach, LLC and Global Financial Group, LLC, and a trustee of The Kothari 2000 Family Trust. YA Global Investments (formerly known as Cornell Capital Partners, L.P., a Delaware Limited Partnership) is a Cayman Islands Exempt Limited Partnership with its principal place of business in Jersey City, New Jersey. Troy Rillo and Liam Cox are officers of YA.
In 2004, Anil Kothari acquired 557 acres of real estate in Costa Rica to build an ocean resort known as Azulera, which would include a golf course, hotel and condominiums (hereinafter referred
to as the "Properties"). The Debtor does not own the land outright, but instead holds 100% of the stock of the Costa Rican companies that own the land. Phase I of this project, known as the Azulera Project ("Project"), consisted of the construction of the hotel, condominiums, and golf course, for which the Debtor obtained loans totaling $85 million from three Costa Rican banks. As of May 7, 2008, the Properties had an appraisal value of $239,635,736.68. Phase II involves the remainder of the Project including the construction of retail and office space.
On April 12, 2007, Kothari and his accountant, Jerome J. Killian of Wiss & Company, met with representatives of YA, including Cox and Rillo, to discuss a $35-$40 million loan that would be subordinated to a construction loan. Kothari completed a questionnaire and provided YA with financial information, a photo album of the site, and plans for the Azulera Project. In addition to the financial information, YA was notified of pending judgments against the Kotharis and their prior Chapter 7 bankruptcy filings. YA did not express any concern as to this information. The Debtor submits that at no time did YA question any of the financial documents provided.
Due to the impending expiration of an option to purchase one parcel of land, Kothari requested $3.725 million from YA for the acquisition, which was to be repaid in four months at an interest rate of twenty-four percent (24%). The closing took place on April 30, 2007. Included among the closing documents was a Guarantee Trust Agreement ("Trust Agreement") entered into at the insistence of YA. Under the Trust Agreement, an entity named Purple Skies Business, Sociedad de Responsabilidad Limitada ("Purple Skies") was created. Purple Skies would be wholly-owned by Global Outreach and would serve as the repository for its interests in the Properties. Purple Skies would then marshal all interests in the Properties and deliver them to a trust called Interlex Fideicomisos, S.A. ("Interlex").
Thereafter, short-term financing was provided by YA in May and June 2007 and ultimately a loan for $41 million was closed in July 2007. The July 2007 loan was used to acquire the Properties and pay off the May and June 2007 Notes, with the remainder being utilized for Project costs. YA agreed to subordinate the July 2007 loan upon the closing of a necessary construction loan. In finalizing the July 2007 loan, YA did not seek any additional financial information from the Debtor or its principals. YA proposed the draft loan documents on July 19, 2007 when the Debtor had an imminent need to close due to the upcoming maturity of the May and June 2007 Notes and the need to acquire the parcels. YA was unwilling to make any material modifications to the documents. Due to the urgency of the situation, the Kotharis signed the documents on July 20, 2007 without their counsel present. After the arrival of their counsel, the loan closed as planned.
In negotiating the July 2007 loan, YA and the Debtor agreed to the utilization of Cushman & Wakefield of Texas, Inc. ("Cushman") to review Global Outreach's invoices. If the invoices were correct and properly related to the Project, they would be paid within three business days. At YA's insistence, the Debtor was to pay Cushman $22,500 per month. This relationship has not been memorialized in a final executed document, though invoices were submitted and paid, including invoices detailing various litigations involving the Debtor and its principals.
During the Fall of 2007, three Costa Rican banks ("Construction Lenders") agreed to lend $85 million in total for Phase I construction with a loan document issued in January 2008, with the expectation that YA would subordinate its loan. However, due to YA's declaration of default, the Construction Loan did not go forward and YA has also refused to subordinate it.
The Debtor contends that its weekend-long groundbreaking ceremonies in January 2008 were attended by political dignitaries and project consultants including Cox and Rillo of YA. The
purpose of the weekend was to generate support for the Project. Many real estate brokers attended strategy sessions regarding the Project's marketing. The weekend cost approximately $800,000 and had been pre-approved by YA. The Debtor alleges that Kothari requested meetings with Cox and Rillo during this weekend to discuss outstanding issues, but the meetings did not take place.
The Debtor further states that YA's lack of due diligence was due to two potential buyers willing to close on the Properties within thirty days of the notice of availability of the Project for an amount higher than the July 2007 loan. The Debtor provides the following as evidence of the alleged scheme purported by YA: (1) YA failed to approve disbursements to Global Outreach and its affiliates while still paying the Project consultants; (2) YA declared a default claiming that Global Outreach's failure to disclose certain obligations despite Global Outreach's contention it had; (3) YA's encouragement of potential claimants to pursue their claims in an effort to force a sale; and (4) YA contacted former employees, inquired as to the status of the construction loan, and requested general information about Kothari.
In January 2008, YA began to delay or refuse payments to Global Outreach and its affiliates for Project-related expenses. In March 2008, Global Outreach's counsel met with YA representatives to discuss their relationship. Thereafter, on April 3, 2008, YA sent a default letter to Global Outreach listing a handful of alleged...
To continue reading
Request your trial